5 Reasons why I choose to invest in real estate

When I first started to educate myself about Real Estate & Real Estate Investing, it was out of necessity. As I mentioned in a previous blog, I was in the process of searching for my first home & I had very little knowledge about the process. I was nervous because I didn’t know anything about mortgages, or buying a house, so I decided to buy books about real estate to learn as much as I could. In the process, I learned more than I ever imagined. It all made sense to me very quickly & I knew that I wanted to own many properties. Now that I have been doing this for a while, I want to share some of the reasons that I choose real estate as my main vehicle for investing.

Residual Income

A friend once told me that “it doesn’t matter what career you choose, just make sure you choose one where people send you checks every month.” Investing in real estate is one of the great vehicles where you receive payments every month. Rents are due on the 1st of the month & I have a tracking system that sends me an email every time a rent payment is deposited into my bank account. It doesn’t matter where I am or what I am doing, those payments come in. It’s not quite like the middle-of-the-night infomercials that say “Sit at home doing nothing all day & money will just appear in your bank account,” but the residual income is real & is one of the great advantages to real estate investing.

Leverage

Most banks require a 20% - 25% down payment when you are buying an investment property. This is different from a owner-occupied home where you may be able to find lower down payments. But from an investment stand point, I don’t know of another investment where you can make a 20% down payment, but receive 100% control of the asset. Image going to a stock broker & asking to buy $100,000 worth of ABC stocks, but you only want to put $20,000 down and you’ll have the bank put up the rest of the money. That just doesn’t happen.

When you have grown to the point where you are using money from Private Investors who are looking to make a great return on their investment, your leverage is even greater.

Tax Benefits

We all want to LEGALLY pay less money to the IRS & real estate investing helps you do just that. Some of the great tax savings write-offs that real estate investing has to offer are things like Interest Paid on Mortgages, Insurance Premiums, Property Taxes, Travel Expenses, Repairs Expenses, etc… The list is pretty extensive.

I make sure that I have a professional handle all of my tax filings. Having a professional file my taxes helps me to ensure that I’m not missing anything & also gives me the peace of mind to know that a trained eye looked over my filing.

Depreciation

Yes, I know, Depreciation is another Tax Benefit but it’s such a cool one that I had to list it separately.

Depreciation is, by definition, a reduction in the value of an asset with the passage of time. From the IRS’ stand point, any asset that you purchase for your business shall be reduced in value over time and you as the owner need to reflect that reduction of value in your taxes every year. The coolest thing about the depreciation write-off is that “on paper” you are taking a deduction because your asset is reducing in value, but in reality the value of real estate historically increases.

Control

I like to have control over my assets. I like to have the ability to regularly see how they are performing & make decisions that could immediately impact the performance or lack-there-of. In the last few days, we’ve seen a decision by Great Britain impact the US Stock Markets. In one day we, my wife & I, lost almost $2,000 in our retirement plans because of things that I have no control over. That doesn’t happen with my rental properties. When the real estate market was at its lowest point a few years back the value of my properties suffered just like everyone else, but the cash-flow never changed. My tenants still needed a place to live & were still required to pay rent every month. I like having that kind of control.

These are just a few of the reasons that I prefer to invest in real estate. Do you have any to add to the list? I’d love to hear them, please leave them in the Comments Section below.

*Note: I am not a CPA or Lawyer, this post is not intended to be financial or legal advice. Consult with your CPA or Lawyer.